Oil posted sizable gains this week.

Volf
FRO 15.02.2019 kl 21:53 1319

Friday, February 15, 2019

Oil posted sizable gains this week, with ongoing outages in Venezuela tightening the market. Also, one of the largest bearish factors for oil – the U.S.-China trade war – showed some signs of easing.

OPEC cut output…and demand forecast. OPEC cut production by 800,000 bpd in January, going a long way to erasing the supply surplus. However, the group also cut the demand estimate for its crude by 240,000 bpd from the last forecast due to a slowing economy. The group is still producing a bit more than what they think is needed. Saudi Arabia already indicated that it would shoulder an additional 0.5 mb/d reduction by March.

IEA warns on quality differences. The IEA said in its latest Oil Market Report that the dwindling supplies of medium and heavy barrels, at a time when light sweet oil is surging from U.S. shale, has disrupted both the crude and product markets. Medium and heavy losses from Iran, Venezuela, Mexico and limited midstream capacity restraining growth in Canada has all combined to put a premium on those barrels. As a result, refiners could face some challenges this year as they search for the right type of crude for their facilities.

EIA: U.S. to surpass 13 mb/d in 2020. The EIA revised up its forecast for U.S. oil production in its latest Short Term Energy Outlook. The agency expects the U.S. to average 12.4 mb/d this year, a huge 300,000-bpd jump from last month’s estimate. Even better, the U.S. could average 13.2 mb/d in 2020, revised up from 12.9 mb/d from the previous report.

Saudi Arabia partially shuts oil field after accident. Saudi Aramco partially shut its Safaniyah offshore oil field after a power cable was cut by a ship’s anchor, according to Reuters. The shutdown occurred about two weeks ago. The Safaniyah field is the largest offshore oil field in the world, with a capacity exceeding 1 mb/d. Energy Intelligence says about 300,000 bpd was impacted.

U.S.-China trade talks make progress. A week of trade talks in Beijing between the U.S. and China ended with both sides indicating that significant progress was made. The talks will continue next week in Washington. It seems unlikely that a comprehensive agreement will be secured before the March 1 deadline, but the WSJ reports that they could agree to a memorandum of understanding outlining a framework trade deal, allowing talks to continue beyond the deadline. President Trump also indicated he would be willing to punt on tariffs if the two sides were making progress.

U.S. bans MTBE shipments to Venezuela. The U.S. has banned MTBE from entering Venezuela, a fuel additive in gasoline. The sanctions could make the gasoline shortage much worse.

Gauidó names a new Citgo board. Venezuela’s opposition named a new temporary board of directors to Citgo this week, a move intended to seize control of the U.S.-based subsidiary of PDVSA.

China negotiates with Venezuela’s opposition. China has loaned more than $50 billion to Venezuela over the last decade, and has begun talks with Venezuela’s opposition, fearing that it could see its position cut off with a change of government. Venezuela still owes China more than $20 billion, to be paid back with crude oil shipments. “China recognizes the increasing risk of a regime change and does not want to be on the bad side of a new regime,” R. Evan Ellis, a China expert at the U.S. Army War College, told the WSJ. “While they prefer stability, they realize they have to put eggs in the other basket.”

U.S. leverage over Iran wanes due to Venezuela. The U.S. is likely to allow some degree of oil purchases from Iran beyond the May deadline, a growing number of experts believe. The catastrophic losses of oil supply in Venezuela, and the failure to secure rapid regime change, will make it difficult for the U.S. to take Iran’s oil exports down to zero without causing an oil price spike. Venezuela sanctions and tighter heavy crude oil market would lead to another round of…U.S. waivers on Iran oil export sanctions,” Sara Vakhshouri, president of Washington-based SVB Energy International, told the WSJ.

Amazon and GM in talks on electric truck. Amazon (NASDAQ: AMZN) and GM (NYSE: GM) are reportedly in talks on investing in Rivian Automotive LLC for a deal that would value the electric truck maker at $1 to $2 billion. The deal would give Amazon and GM minority stakes in Rivian, Reuters reports. Rivian is trying to mass market an electric pickup truck.

U.S. and German tensions ease. Germany agreed to help finance an LNG import terminal that would receive gas shipments from the United States, and in return, the Trump administration will pullback from its effort to try to kill the Nord Stream 2 pipeline. The handshake agreement eased tensions between the two countries. U.S.-German relations have taken a turn for the worse under the Trump presidency, with high-profile fights over the Iran nuclear deal, the Paris Climate agreement, steel tariffs, NATO and the Nord Stream 2 pipeline, among other issues.

EU convenes summit on alternative to dollar. The European Union held a summit to promote the euro in an effort to break dollar dominance, according to Reuters. The meeting included top European oil and gas companies, utilities, and other industrial giants. The EU has long paid lip service to its preference for alternatives to the dollar, but the souring ties between the EU and the Trump administration has accelerated those efforts. “Washington doesn’t like cartels like OPEC,” one participant told Reuters. “But then how can you have one market dominated by one currency - the dollar.”

China’s imports and exports rebound in January. China’s imports and exports rose faster than expected in January, reducing fears of a dramatic slowdown. Both metrics were in negative territory in December.

Energy companies perform better without growth metrics. Oil and gas companies have long tied production growth or reserve replacement growth to CEO pay. A new report finds that companies that separate executive pay from growth metrics perform better. This comes at a time when shareholders are increasingly pressuring the oil and gas industry to focus more on profits rather than growth. Moreover, the prospect of peak demand calls into question aggressive spending on long-lived assets.

Chevron bets on shale. In an interview with Bloomberg, Chevron’s (NYSE: CVX) CEO Mike Wirth laid out a vision of belt-tightening and lower spending, with an overwhelming focus on shale, particularly in the Permian. Gone are the days when Chevron threw down billions of dollars on a single project. Chevron’s spending is about half of what it was in 2014.
Volf
15.02.2019 kl 21:55 1318

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher on Friday and for the week for a number of reasons, mostly affecting the supply side. The markets are being supported primarily by deeper-than-expected OPEC-led production cuts and the impact of U.S.-led sanctions on Venezuelan oil exports. Despite these moves, on a macro level, the global oil market remains well-supplied. Additionally, gains are being limited by weakening global demand.

Production Cuts Supportive

On the supply side, Saudi Arabia, the defacto leader of OPEC, said it cut daily production and exports by a further 500,000 barrels per day (bpd) on top of its agreed OPEC quota reduction. Since January 1, an OPEC-led group has been cutting at least 1.2 million barrels per day from production in an effort to trim the global supply and stabilize prices. On Tuesday, the Saudis said it had cut its output by almost 800,000 bpd in January to 30.81 million bpd.

The markets received a boost late in the week after Saudi Arabia said it would cut even more in March than it originally pledged. Russia said that it has cut its oil production by 80,000-90,000 barrels per day from its level in October, Moscow’s reference level for its cuts, the country’s energy minister said.

In the meantime, the political rift between Venezuela and the United States continues with the U.S. sanctions against the South American nation giving prices a slight boost.

Trade Deal Optimism

Traders are saying that positive chatter about the on-going high-level U.S-China trade negotiations in Beijing are helping to support prices because an end of the trade dispute should drive up crude oil demand for the world’s second largest economy.

Rising Chinese Imports Supportive

On Thursday, a trade balance report showed China’s crude oil imports in January rose 4.8 percent from a year earlier to an average of 10.03 million barrels per day (bpd). This marked the third straight month that imports have exceeded the 10 million bpd level.

U.S. Supply Capping WTI Gains

While the supply cut news has been especially bullish for Brent crude oil futures, the news from the U.S. government’s weekly inventories report wasn’t particularly bullish for WTI crude prices.

According to the U.S. Energy Information Administration’s weekly inventories report for the week-ending February 8, U.S. crude oil stockpiles rose last week to the highest since November 2017 as refiners cut runs to the lowest since October 2017.

Crude oil inventories built for a fourth week in a row, rising 3.6 million barrels to 450.8 million barrels in the week to February 8. Traders were looking for an increase of 2.7 million barrels.

Most analysts expect U.S. to rise past 12 million bpd soon, and perhaps even hit 13 million bpd by the end of the year.

IEA Not So Bullish

According to the International Energy Agency, the global oil market will struggle this year to absorb fast-growing crude supply from outside the Organization of the Petroleum Exporting Countries (OPEC), even with the group’s production cuts and U.S. sanctions on Venezuela and Iran.

Furthermore, the IEA said it expected global oil demand this year to grow by 1.4 million bpd, while non-OPEC supply will grow by 1.8 million bpd. This doesn’t bode well for the long-term crude oil bulls.

Brent and WTI Crude Oil Diverging

Brent crude oil continued to outperform WTI, hitting its highest level since November 21 while the U.S. contract remained below its early February high.

The spread between Brent crude oil and WTI crude oil has risen from a low of $6.80 on January 31 to a high of nearly $10.00. This is the result of a combination of the OPEC-led production cuts and the sanctions against Venezuelan exports, which are supportive for Brent crude oil, and the rising U.S. production, which is helping to limit gains for WTI crude oil.

Fundamental Forecast

Short-term, the crude oil market looks bullish, but as WTI and Brent futures contracts approach the 50 percent retracement levels from their October highs to their December lows, the rally should stall. This is because the market is still oversupplied.

Furthermore, I don’t think the objective of the OPEC production cuts is to drive the market to triple-digit highs, but rather to reach a fair price while balancing supply and demand. The fundamentals suggest Brent should average between $65.00 and $70.00 per barrel in 2019.

Technical Analysis

Technical Analysis of Weekly April WTI Crude Oil Market



The main trend is down according to the weekly swing chart. The market isn’t even close to changing the main trend to up. However, momentum is trending higher.

The minor trend is up. This move shifted momentum to the upside. A trade through $56.05 will reaffirm the minor uptrend. A trade through $51.62 will change the minor trend to down. This will also shift momentum back to the downside.

The short-term range is $43.00 to $56.05. If the short-term rally fizzles out then look for a pullback into its retracement zone at $49.53 to $47.99. This will occur when buyers decide not to chase the market higher and shift their focus to buying value.

The main range is $76.01 to $43.00. Its retracement zone at $59.51 to $63.40 is the primary upside target. Since the main trend is down, sellers are likely to show up on a test of this zone.

The market is likely to surge into $59.51 to $63.40 if there is a U.S.-China trade deal.

Technical Analysis of Weekly April Brent Crude Oil Market



The main trend is down according to the weekly swing chart. However, momentum is trending higher. The minor trend is up. A trade through $59.40 will change the minor trend to down. The minor trend is controlling the momentum.

The main range is $84.82 to $50.71. If the upside momentum continues then look for the rally to extend into its retracement zone at $67.77 to $71.79. Since the main trend is down, sellers are likely to re-emerge on a test of this area.

Weekly Forecast

The counter-trend rallies in both WTI and Brent crude oil are being underpinned by the OPEC-led production cuts and the U.S. sanctions on Venezuela. This news along with positive developments over U.S.-China trade relations should be enough to drive prices into their respective retracement zones.

Once the zones are reached concerns over rising U.S. production should kick in, bringing an end to the upside momentum.
fjellmann1
15.02.2019 kl 22:06 1290

Vil sterk vekst i shaleoilproduksjon føre til økt eksport på VLCC? I såfall bull for frontline.
Ordreboka for 2019 og 2020 er 60 og 40 VLCC, totalt 100. Vil markedet absorbere alle?? Det store spm.
Nye skip med scrubber vil nok uansett bli god butikk?
Slettet bruker
16.02.2019 kl 15:10 1115

FRO ser ut til å ha bunnet ut siste uke og raste opp hele 20% fra 42kr til 50,8kr. Spørsmålet er om den gunstige kursutviklingen vil fortsette de neste børsdagene og -ukene?
Warrent
16.02.2019 kl 16:19 1071

vridning fra iran til usa export vil booste ratene, dette må prises inn raskt. Utsettelse av handelskrigen med kanskje avtale på energi og agrikulturprodukt vil løfte tankaksjene enda mer.